Page 1645 - Week 05 - Thursday, 8 May 2008
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problem for the government is that it is unable to develop a coherent budget strategy and stick to it. We see a government that acts to contradict, in a subsequent budget, its earlier budgetary decisions. We see a government that cries wolf about the future of the ACT in 2006 when the evidence shows that this was not warranted.
There are two issues that emphasise the failure of the Stanhope government to implement coherent budget strategies. First, there is the history of the Stanhope government’s budget since 2002-03, and there can be no doubt that the ACT has revelled in economic good times ever since the Stanhope government was elected in October 2001. As an aside, it does need to be acknowledged that this economic good fortune was largely the result of sound economic management by the Howard government in giving Australia more than 10 years of sustained economic growth while the rest of the world experienced such issues as the financial crisis in Asia, the economic crisis in Russia, the collapse of major corporations such as Enron and the bursting of the tech bubble in 2000.
Our Chief Minister has been quick to point out on numerous occasions how well the ACT economy has been performing across a range of economic indicators for a number of years. Yet, despite this inherently very sound economic performance, what budget strategy have we seen from the Stanhope government except spend, spend, spend? The answer to that question is very easy. There has not been any coherent budget strategy.
We need only to go back to 2003-04, for example, when the Stanhope government budgeted for a deficit—yes, budgeted for a deficit—even though the economy was quite strong. That year the economy recorded a large surplus. In the 2005-06 year the Stanhope government again budgeted for a deficit. This time, our economy was booming and a deficit of $91 million became a surplus of $134 million—a turnaround of some $225 million. In 2006-07 the Stanhope government budgeted for another deficit—only $17 million this time—and what happened? With our economy really booming through injections from the federal government, there was a surplus of $332 million. Yes, that is right: a turnaround of $349 million.
There are two observations that I can make about these budget performances. First, the Stanhope government has clearly never had a coherent overall budget strategy for the ACT. Otherwise, we would not have had this wide variation between budget forecasts and actual outcomes. Second, the Stanhope government has acted against all economic wisdom by budgeting for deficits during times of strong economic activity. This approach is just plain stupid. The logic is simple—very simple even for someone like the Chief Minister: governments do not need to prime the economic pumps when an economy has been performing and continues to perform strongly. Governments need to pump-prime only when resources are not being used or they are underutilised. And, of course, governments also need to be careful that they do not pump-prime too much at the wrong time.
Let me look at the strategy that the Chief Minister and his colleagues have adopted in their latest budget. Again, it is a most interesting strategy as it sits strangely against the strategy that was shown to the people of Canberra in the government’s budget only two years ago, the memorable 2006 budget when we had to reduce, according to
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